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Friday, July 25, 2014

Businesses don't leave the U.S. because of lack of patriotism

By Curtis Dubay -

President Obama will deliver a speech today railing against corporate inversions. That is the process whereby a U.S. business merges with a foreign business and moves the new joint business’s headquarters to the foreign country. Inversions have been a hot topic recently because well-known businesses such as Walgreens, Pfizer, and Medtronic have been looking to engage in the process.

The president, like others before him, decried this practice because he believes it displays a lack of patriotism. However, inversions have nothing to do with love of country. They are all about U.S. businesses keeping up with their global competition.

When a U.S. business inverts it continues paying the same amount of tax it always has on its U.S. income. Any business, no matter where headquartered, pays the 35 percent U.S. corporate tax rate – which is the highest corporate tax rate in the world — on income earned within our borders.

The policy causing all the problems is the extra tax the U.S. levies on the income its businesses earn in foreign countries. This is known as a worldwide tax system. The U.S. is the only industrialized country that taxes the foreign earnings of its businesses.

The worldwide system makes it difficult for U.S. businesses to compete with their international brethren because those businesses don’t face an extra layer of tax when they invest in a growing new market. The extra tax U.S. businesses face makes certain investments unattractive for U.S. businesses that remain attractive to their competitors.

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Businesses don't leave the U.S. because of lack of patriotism

By Curtis Dubay -

President Obama will deliver a speech today railing against corporate inversions. That is the process whereby a U.S. business merges with a foreign business and moves the new joint business’s headquarters to the foreign country. Inversions have been a hot topic recently because well-known businesses such as Walgreens, Pfizer, and Medtronic have been looking to engage in the process.

The president, like others before him, decried this practice because he believes it displays a lack of patriotism. However, inversions have nothing to do with love of country. They are all about U.S. businesses keeping up with their global competition.

When a U.S. business inverts it continues paying the same amount of tax it always has on its U.S. income. Any business, no matter where headquartered, pays the 35 percent U.S. corporate tax rate – which is the highest corporate tax rate in the world — on income earned within our borders.